Analysis and Benchmarking of Business High-Growth Performance in Scotland, January 2020

Scottish Enterprise (SE) commissioned the Enterprise Research Centre to carry out data analysis to explore further the high-growth dynamics of Scotland’s business base, benchmarking this against other regions of the UK and, where possible, other countries. The analysis also presents a critique of the definition of a HGF and sets out some alternatives definitions and methodologies to allow policymakers to more accurately focus on business growth over time.

Data was gathered from the UK Business Structure Database (compiled by the Office for National Statistics) which records annual data on employees for the entire population of firms in the UK.

Scotland has a ‘high-growth deficit’ according to the descriptive analysis presented in this report based on the OECD definition of a high-growth firm. There would have been an additional 128 HGFs (20% employment definition) in Scotland. As expected age and size and prior growth explain a large part of the likelihood a business will experience a high-growth episode in any one year and being located in Scotland would not appear to be a major disadvantage. However, a lack of ambition could directly impact the performance of firms and could help explain why we see low levels of HGFs in Scotland. A further explanation of a relatively low high-growth incidence rates may lie in the domain of so called “growth-regimes”.

Scottish Enterprise should adopt a more nuanced view about business growth and high-growth in particular. Reliance upon a single definition (i.e., the OCED HGF) is less than optimal. Research into the triggers of growth episodes and an examination of the role of the various interventions associated with the Account Managed system in Scotland would be an invaluable next steps project.